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TRUSTS IN MALAYSIA
By:
July 2017
The students/authors confirm that the work submitted is their own and appropriate
credit has been given where references has been made to the work of others.
ACKNOWLEDGEMENT
The completion of this undertaking would not have been possible without the generous
support that we have received from the people around us. It is this very support that
assisted us in enduring the hardships that inevitably come hand in hand with the
process of finishing a thesis of this scale.
We would like to give special thanks to our adviser, Mr John Chuah Chong
Oon, for his endless patience and guidance throughout the entire semester. If it were
not for him, the completion of this research paper entitled ‘Regulating the
Administration of Charitable Trusts in Malaysia’ would not have been possible. His
tireless energy and constant presence have been a pivotal driving force in ensuring that
our research paper would be in optimal shape for submission. His keen eye for detail
has also contributed massively to the outcome of this thesis.
We also would like to extend our gratitude to our respective family members
and friends for their unending stream of motivation that has sustained us throughout
the completion of this research. With their reassurance and emotional support, we
managed to carry out this task with a calm mind.
Last but not least, we would like to thank God Almighty for without His
blessings, we would not have gained the strength and resolve required to endure the
challenging process that lies in the writing of this thesis.
ii
ABSTRACT
The aim of this research is to ascertain the administration of the charitable trust and its
problems in Malaysia. The research methodology employed is doctrinal in nature. A
comparative study is also conducted with the charitable trust law of several other
countries which are the United Kingdom, Australia, New Zealand and Singapore. The
findings of the objectives reveal that the Malaysian local legislation namely the Trustee
Act 1949 fails to properly cater for the needs of the administration of charitable trust
in Malaysia in four particular aspects. Firstly, is on the issue of registration of a
charitable trust. There is no mandatory registration of the charitable trust in Malaysia
to ensure transparency and accountability via the monitoring of the respective trustees
and charitable bodies. As such it is expeditious that mandatory registration of the
charitable trust be provided in Malaysia to ensure its proper administration. Secondly,
there is no regulatory bodies to monitor the administration of the charitable trust as we
find in other countries. We suggest that the Trustees Act 1949 provides for the setting
up a regulatory body who can take charge of charitable trusts in Malaysia. Thirdly, as
far as the fundraising of charitable trust is concern, the local laws are arguably
insufficient to protect the fund collected for the charitable trust. We are of the opinion
that the regulations provided under the Code for Fundraising Practice 2012 of England
and Wales be adopted to regulate against any fraud pertaining to collection of fund via
the charitable trust in Malaysia.
iii
TABLE OF CONTENTS
Acknowledgement ii
Abstract iii
Table of Contents iv
List of Statutes vii
iv
3.1.4 Regulation for fundraising by the charitable trust 21
3.2 Australia 22
3.2.1 Registration of the charitable trust in Australia 22
3.2.2 Tax concessions of the charitable trust in Australia 23
3.2.3 The Role of the Australia Charities and Non-For-Profit 24
Commission (ACNC)
3.2.4 Limitations of the Australia Charities and Non-For-Profit 25
Commission (ACNC)
3.2.5 Charitable Fundraising in Australia 25
3.4 Singapore 32
3.4.1 Registration of the charitable trust 32
3.4.2 Administration of the charitable trust by the Commissioner of 34
Charities and the Charity Council
3.4.3 Charitable Fundraising in Singapore 36
v
CHAPTER FOUR: RECOMMENDATIONS
4.0 Introduction 42
4.1 Registration of the charitable trusts 42
4.2 The establishment of a regulatory body for the administration of 44
charitable trust in Malaysia
4.3 Tax concessions for charitable trusts 46
4.4 Fundraising activities by charitable trusts 47
Bibliography 49
Appendices
Appendix 1: Model Trust Deed for a charitable trust
Appendix 2: Australia Charities and Non-For-Profit
Commission (ACNC) Application Guide
Appendix 3: Registration of charitable trust in New Zealand
vi
LIST OF STATUTES
AUSTRALIA
Australia Charities and Non-for-profit Commission Act 2012 (No. 168)
Charities Act 2013 (Act No. 100 of 2013)
Corporations Act 2001 (Act No. 50 of 2001)
INTERNATIONAL TREATIES
The Hague Convention on the Law Applicable to Trust and their Recognition
MALAYSIA
Charitable Trusts Ordinance of Sarawak 1994 (Chapter 7)
Companies Act 2016 (Act 777)
Government Proceedings Act 1956 (Act 359)
House to House and Street Collections Act 1947 (Act 200)
Income Tax Act 1967 (Act 53)
Societies Act 1966 (Act 335)
Trustee Act 1949 (Act 208)
NEW ZEALAND
Charitable Trusts Act 1957 (No. 18)
Charities Amendment Act 2012 (No. 2)
Charities Act 2005 (No. 39)
Companies Act 1993 (No. 105)
Incorporated Societies Act 1908 (No. 212)
SINGAPORE
Charities Act 1982 (repealed)
Charities Act 1994 (Revised Edition 2007) (Chapter 37)
Charities (Registration of Charities) Regulations 2007 (Revised Edition 2008) G. N.
No. S 178/2007
House to House and Street Collections Act 1947 (Chapter 128)
Income Tax Act 1947 (Revised Edition 2014) (Chapter 134)
Societies Act 1985 (Chapter 311)
Trustees Act 1967 (Chapter 337)
UNITED KINGDOM
Charities Act 2011 (Chapter 25)
Charitable Trusts Act 1853 (repealed)
Charities Act 1992 (Chapter 41)
Code of Fundraising Practice 2012
House to House Collections Act 1939 (Chapter 44)
Income Tax Act 2007 (Chapter 3)
Statute of Charitable Uses 1601 (repealed)
vii
CHAPTER ONE: INTRODUCTION
1
1.0 BACKGROUND OF RESEARCH
The definition of trust had been provided under Article 2 of The Hague Convention on
the Law Applicable to Trusts and Their Recognition as “the legal relationships created,
whether inter vivos or on death by the settlor, when assets have been placed under the
control of a trustee for the benefit of a beneficiary or for a specified purpose”. 1
Charitable trusts is created for charitable purposes that will benefit the public at large.
Under the common law, charitable trusts must fall within these ambit of charitable
purposes which are for the relief of poverty, the advancement of education, the
advancement of religion and for other purposes beneficial to the community. 2 The
charitable trust is arguably one of the alternative giving device that may improve the
country’s social welfare.3
In Malaysia, the primary sources of the law of charitable trusts are the local
legislation and cases derived from the commonwealth and United States jurisdictions
are admissible. In the court, those sources of law become the ultimate reference by the
court in solving charitable trust litigations since there is no governing legislation in
matter of charitable trust. The absence of a specific governing legislation on the
charitable trust within our country creates problems when it comes to the
administration of charitable trust.
1
Article 2 of The Hague Convention on the Law Applicable to Trusts and Their Recognition.
2
Commissioners of Income Tax v Pemsel [1891] A.C. 531.
3
Allan D. Vestal, “Critical Evaluation of the Charitable Trust as a Giving Device” in Estate and
Trusts Commons (Washington University Law Review, 1957) 195.
2
Street Collections Act 1947 which regulates public collections law. However, there
are no guidelines provided therein for the fundraising by the charitable trust. In respect
of tax privilege, the charitable trust may apply for tax exemption as provided under
Income Tax Act 1967. The rationale for granting such privilege to charitable trust is
that there is sufficient benefit to the public at large for the charitable trust continues to
exist.
3
1.1 RESEARCH PROBLEM
The major problem associated with the charitable trusts in Malaysia is there is no
proper regulatory body established under the law to oversee the administration of
charitable trusts. A specific regulatory body is needed for the purpose of facilitating
the administration of charitable trust which may involve a huge amount of public fund.
Thus, the absence of such regulatory bodies constitutes a current shortcoming under
Malaysian trust law.
Furthermore, the absence of regulation for the charitable trust can lead to the
commission of fraud especially when it involves fund-raising activities.7 The only law
in Malaysia governing the solicitation of funds is the House to House and Street
Collections Act 1947 whereby any solicitation for donation must get a permit from the
licensee officer which is the Chief Police Officer 8. However, there is no guideline
stipulated under any law on how to raise the funds from the public. This is because a
mere issuance of license by police without supervising the fund-raising is insufficient
4
George, Mary. (2010) An Overview of Issues in Charity Litigation in Malaysia.
<http://www.icnl.org/research/journal/vol4iss1/art_3.htm> accessed on 15 March 2017. p 9.
5
Charities Act 2011, s 35.
6
Note 4.
7
Attorney General v Mathieson (1907) 2 Ch. 383.
8
House to House and Street Collections Act 1947, s 4(1).
4
to cater the commission of fraud by those who executed the funds. Therefore, the
commission of fraud may occur if the charitable trusts are unregistered. Equally
important, when the fund-raising or donation activities are made via online, this will
also inevitably transpire the issue of fraud.9 When the funds are gathered via Internet,
fraud is highly to happen as compared to conventional way of fund-raising. 10 The
advance modus operandi is used by the syndicate to induce and solicit a large amount
of public monies because more Malaysian nowadays is using the Internet especially
for online banking.11 This may encourage the illegal syndicate to further unlawfully
solicit the funds.12 Furthermore, under the House to House and Street Collections Act
1947, there is no rules and regulations to supervise and administer the solicitation of
funds through the Internet.
The third problem is the Malaysian Trustee Act 1949 which does not have any
provisions governing charitable trusts pertaining to its proper administration thereof.
The Trustee Act 1949 only governs the executorship and administration of the office
of trustee but no regulation for trustees of a charitable trust. 13 This implies that the
coverage of the Trustee Act 1949 is not wide enough.
9
Note 4.
10
Note 4.
11
“Do you know where your donation is going?”, Malaysian Digest Report (19 August 2014)
<http://www.malaysiandigest.com/news/514085-do-you-know-where-your-donation-is-
going-i-collected-rm150-illegally-in-half-an-hour.html> accessed on 20 May 2017.
12
Note 4.
13
Guru Dhillon, Noor Mohammed, and Ng Yih Min. (2011) Equity & Trust Law Application in
Malaysia, UK and US – In Tandem or Apart?.
<https://www.researchgate.net/publication/234661135_Equity_Trust's_Law_applications_in
_Malaysia_UK_and_US_-_In_tandem_or_apart> accessed on 15 March 2017. p 4.
5
1.2 RESEARCH QUESTIONS
1. What are the legal problems associated with the administration of charitable
trusts in Malaysia?
2. What are the legal safeguards that can be implemented in Malaysia to ensure
the proper administration of charitable trusts?
The aim of this research is to ascertain the correct law in the administration of the
charitable trust in Malaysia. In order to fulfil the aims, the objectives are as follows:
1. To identify the correct law which can safeguard the interest of beneficiaries
under charitable trusts in Malaysia.
2. To suggest recommendations in the Trustee Act 1949 which could protect the
interest of beneficiaries under charitable trusts in Malaysia.
6
1.4 SIGNIFICANCE OF RESEARCH
The significance of the research revolves around contributing to the legal literature of
trust law in Malaysia. To the researcher knowledge, there is a dearth of research in the
area of charitable trust and it follows that our research may spark of a host of further
research in this area of law. It is a basis of which further research can be built upon.
Lastly, the research arguably fills in an important area in the Malaysian Trustee Act
1949 to further improve our statutory law in trust. On a socio legal basis, the research
sheds light to some salient principles of law which are not previously known to the
legal fraternity.
The study was conducted for the purpose of comparing the existing laws governing on
charitable trust in Malaysia with the selected foreign jurisdictions such as United
Kingdom, Australia, New Zealand and Singapore. The selection of those jurisdictions
as a comparison was made on the basis that they have adopted the common law
principles similar to Malaysia and also due to their progressive development of laws
governing on charitable trust. There are three inevitable limitations that we faced in
conducting the research. The first limitation is a short period of time where the study
had to be done within three months. As due to time constraint, the area of the research
has to be narrowed down in order to accomplish the research within stipulated time
and it also limits the researchers to have a full-scale research. The second limitation to
the research is monetary constraint. There is no fund provided for the researchers to
conduct the research or self-financing can limit the implementation of the research.
The third limitation is the availability of material for reference. There is insufficient
reference and sources as the research is done through sources which is available at the
Library of Tun Abdul Razak 2, Universiti Teknologi MARA and browse through the
internet.
7
1.6 RESEARCH METHODOLOGY
In view of the fact that the research objective focuses on identifying the correct law
pertaining to the administration of charitable trust in Malaysia by studying the law of
other countries (United Kingdom, New Zealand, Australia and Singapore), it is thus
submitted that the doctrinal study is suited for this research. According to Anwarul
Yaqin (2007), he describes the doctrinal research as a library based research because
all the materials needed from primary and secondary sources of law can be obtained
in libraries, archives and online databases.14 Schneider & Teitelbaum (2006) maintains
that the doctrinal research involves the development of legal doctrines via statutory
and case study.15 Furthermore, there is no need for us to do any interviews or surveys
because this research is a pure legal study which has little socio legal implications to
the public. The only implication is pertaining to the legal right of the parties involved
in a charitable trust. Hence, empirical research is not employed because this research
does not deal with law relating to pure social problems, issues or question.16
In conducting this legal research, research method that will be employed by the
researchers is comparative studies by comparing and contrasting the development of
charitable trust in Malaysia with other countries. Anwarul Yaqin (2007) states that
comparative studies involve the study of some problems in one legal system and make
a comparison with other legal systems for the purpose of improving the law in order
to make it more effective and efficient.17
14
Anwarul Yaqin, Legal Research and Writing (Malayan Law Journal, 2008) at 10.
15
The theoretical research entails systematic explanation of the way legal institutions work and
of the principles that should animate the law and why it should act in a particular way. Thus
the theoretical research has little relevance to the study of ascertaining the correct law for
certainty of subject matter. See Carl, E. Schneider, & Lee, E.Teitelbaum, “Life's Golden Tree:
Empirical Scholarship and American Law” in Utah Law Review (University of Utah, 2006)
at 53.
16
Note 14.
17
Note 14 at 20.
8
CHAPTER TWO: LITERATURE REVIEW
9
2.0 LITERATURE REVIEW
Wan & Andrews (2005) states that charitable trust has not been statutorily defined in
the context of West Malaysia.18 Hence according to the author, the Preamble to the
English Statute of Charitable Uses 1601 can be referred to provide a useful reference
point as to what amount to charitable trust in law. Haley & McMurtry (2011) states
that charitable trust is different from private trust because charitable trust are purpose
trusts. 19 Ascertainable beneficiaries is not required in charitable trust because
Attorney-General is the one who enforces the trust. Secondly, the object of charitable
trusts need not be certain. The principle provides that as long as the object is
exclusively charitable, the trust is valid. Thirdly, charitable trust is not subject to the
rule against perpetuity. Nevertheless, private trusts and charitable trusts have
something in common in which they may be created inter vivos or by will and the rules
of certainty of intention and certainty of subject matter are applicable to them.
George (2001) has proposed that a uniform definition is needed for classification
of the charitable trust in Malaysia.20 This is due to the facts that the establishment of
charitable trusts that is derived from both Suruhanjaya Syarikat Malaysia and Registrar
of Society is not in harmony. The practice of classifying the objectives of charitable
bodies made by those institutions are different with the classifications under the
Pemsel’s heads. Vaughan (2016) states that there is a reformation of regulation of
charity in Australia, the definition of charitable purpose has been included in the
Charities Act 2013.21 It signifies that there is the specific definition under Australia
law of charities. The Charities Act 2011 in United Kingdom provides that the Charity
Commissions is responsible to ascertain whether the charitable trust is beneficial to the
public. Charities Act 2011 also provides the enumeration of charitable purposes which
proves the significance of development under United Kingdom charitable trusts. 22
18
Wan Azlan Ahmad, & Paul Linus Andrews, Equity and trusts in Malaysia (Selangor: Sweet
& Maxwell Asia, 2005) at 103.
19
Micheal Haley, & Lara McMurty, Equity and Trusts (Sweet & Maxwell, 2011) at 198.
20
Note 4 at 22.
21
John, Vaughan-Williams, “The future of charity litigation in Australia: Complexities of
change” in The Future of Charity Regulation (Adelaide Law Review, 2006) 37. p 224.
22
Alison MacLennan, Running a Charity, 3rd ed (Jordan Publishing Limited, 2008) at 1.
10
Meanwhile, the position in Singapore is slightly different although that the Republic
has enacted the specific statute governing the charitable trusts. The principle is
charitable trust cannot be charitable unless established for ‘exclusively charitable
purposes’ in accordance to the law of Singapore. 23 Ter (1985) states that this
connotation means that the court of Singapore may depart from common law cases
depending on local circumstances.24 To summarize, those are the assertions connoting
the development in defining the charitable trusts according to respective countries.
23
Charities Act 1982, s 2.
24
Ter Kah Leng, The Law of Charities – Cases & Materials of Singapore and Malaysia
(Butterworths, 1985) at 109.
25
Note 4 at 22.
26
Ibid.
27
Note 13.
28
Hubert Picarda, The Law and Practice Relating to Charities, 1st ed (Bloomsbury Professional,
2014) at 434.
29
Ibid.
11
regulation of the charitable trust as exemplified by their Charities Act 1982. Ter (1985)
states the Charities Act 1982 was introduced for the registration of charitable trust to
the Commissioner of Charities and the applicability of the cy-pres doctrine. The
Charities Act 1982 was derived from the English Charities Act 1960 but with some
amendments.30 In general, the charitable sector in Singapore consists of double-tier
which are charities and Institutions of a Public Character.31
The Trustee Act 1949 focuses only on matters of trust, executorship and administrator
of the office of trustee.35 There is no provision stipulated under the statute concerning
on the charitable trust or duties of charity trustees. Although there is no equivalent
charity legislation in Malaysia, the state of Sarawak had their own state legislation
30
Note 24 at 192.
31
O' Halloran et al, “Charity law reforms : Overview of progress since 2001" in McGregor-
Lowndes, Myles & O'Halloran, Kerry, eds, Modernising charity law : recent
developments and future directions (Cheltenham: Edward Elgar Publishing, 2010) at 21.
32
Newell, H., Accountability of Charities and Sporting Bodies Working Party Comprehensive
Report (Wellington: Foresee Communications, 1997).
33
Poirier, D., Charity Law in New Zealand (Department of Internal Affairs New Zealand, 2013)
at 372.
34
Note 21 at 243.
35
Note 13 at 2.
12
called as Charitable Trusts Ordinance 1994 which deals with the administration of the
charitable trusts in the state.36 George (2001) states that the charitable trust in Malaysia
are constituted in various ways and their constitution also varies.37 She argues that the
establishment of charitable trusts can be divided into three distinct platforms which are
statutory charities, charitable companies and charitable societies.38
36
Note 24 at 192.
37
Note 4 at 22.
38
Ibid at 3.
39
Ibid at 9.
40
Note 13 at 4.
41
Note 28 at 445.
42
Note 21 at 236-237.
43
Ibid.
44
Cordery, Carolyn J., & Basekerville-Molley, Rachel F, “Charity Financial Reporting
Regulation: A Comarison of the United Kingdom and Her Former Colony” in Working
Paper Series (Wellington: Victoria University of Wellington, 2005) 20. p 22.
45
Tessa Vincent. (2015) An uncharitable appeal framework for charities: Is it time for a
Charity Tribunal. <https://www.otago.ac.nz/law/research/journals/otago451218.pdf>
accessed on 5 May 2017. p 15.
13
2.4 Fundraising activities by charitable bodies
46
Note 4.
47
Warburton, J., & Morris, D., Tudor on Charities, 8th ed (Sweet & Maxwell, 1995) at 263.
48
[1982] Ch. Comm. Rep., paras 17-23.
49
Charities Act 1960 (repealed).
50
Note 47.
51
Note 21.
52
Ibid.
14
2.5 Exemption of Tax
The issue that significance to the charitable trusts is the exemption of tax. If the
charitable bodies fulfil the requirement of charitable purpose, the relief of tax will be
granted by the government.53 The main issue associated with the exemption of tax is
pertaining to the legitimacy of charity involvement in business activities. Breed (2009)
states that the arguments relating to the issue is for the complete separation between
charitable trust and business.54 The contention is that the charity which is engaged with
business has enjoyed an unfair advantage because of the tax exemptions afforded to
charitable trust. 55 The position in Malaysia is the income of any institution or
organisation which is not operated or conducted primarily for profit and are approved
for the purposes of section 44(6) of Income Tax Act 1967, will enjoy the relief of tax.
The exemption of tax for the matters relating to non-for-profit organisation is governed
under Part IX entitled “Exemptions, Remission and Other Relief” under the Income
Tax Act 1967. In granting the relief, the Malaysia Department of Inland Revenue will
stipulate certain conditions that the organisations need to comply in order to qualify
for tax exemption.56
53
Income Tax Act 1967, s 44(6).
54
Breen, O, “Holding the Line: Regulatory Challenges in Ireland and England when Business
and Charity Collide” in McGregor Lowndes, Myles & and O'Halloran, Kerry,
eds, Modernising Charity Law: Recent Developments, Future Directions (Cheltenham:
Edward Elgar Publishing, 2010).
55
Ibid.
56
Note 4 at 20.
57
Note 47 at 282.
58
Ibid.
59
Note 4 at 20.
15
charitable bodies which have been endorsed by the Australia Taxation Office are not
required to file any income tax returns and there will be no relief granted if there is a
commercial activity which is not incidental to charitable purpose.60 The problems in
granting the relief of tax in Malaysia is that the classification of charitable purpose of
certain charitable bodies when made by the Director General of Income Tax is not the
same as the common law position.61
60
Myles, McGregor-Lowndes. “Comparative Analysis: The Global Perspective
Australia” (Conference on National Centre on Philanthropy and the Law, Australia, 24-25
October 2002). p 6.
61
Note 4 at 20.
16
CHAPTER THREE: RESEARCH FINDINGS
17
3.0 INTRODUCTION
The findings of the objectives of this research and its ensuing significances are
discussed in this chapter. Under the first objective of this research, the charitable trusts
laws of United Kingdom, Australia, New Zealand and Singapore will be scrutinised in
order to identify the correct law which can safeguard the interest of beneficiaries under
charitable trusts in Malaysia. The research findings will be categorized into four main
areas, namely the registration of the charitable trust, the establishment of the regulatory
bodies in governing the regulation of charitable trusts, tax concessions and fundraising
activities by the charitable trust. This will be followed by an analysis based on the
findings.
The governing statute for charitable trust in England and Wales is the Charities Act
2011. The regulatory body that is responsible for registering and supervising the
charitable trust in England and Wales is the Charity Commissions.62
Every charitable trust must be registered in the register with the Charity
Commissions.63 The registration must contain the names of charitable bodies and other
particulars as required by the Charity Commissions such as address, contact person,
the name of trustee. 64 The registration information is subject to public inspection
which was made available at the official website of the Charity Commissions.65 The
trustee of charitable trust has the duty to register with the Charity Commissions by
submitting all the relevant documents including trust deed and will.66 Failure to do so
will render the trustee in breach his legal obligation.67
62
Note 5, s 13(1).
63
Ibid, s 29(1).
64
Ibid, s 29(2).
65
Ibid, s 38(1).
66
Ibid, s 35(1).
67
Ibid, s 41.
18
fulfil all the criteria of charitable purposes.68 Secondly, the charitable trust must fulfil
the public benefit requirement.69 The Charity Commissions has provided guidelines
that the public benefit requirement has two aspects.70 The first aspect is ‘benefit aspect’
in which the purposes must be beneficial to the public. The benefit must not bring any
detriment or harm to the people, property or the environment.
The second aspect is ‘public’ where the purpose of charitable trust must be
beneficial to the public in general. 71 The charitable purposes must satisfy both the
benefit and the public aspects. All the eligibility to register will be ascertained by the
Charity Commissions after the application has been submitted.72 After application has
been approved by the Charity Commissions, the settlor has to write a governing
document in the form of trust deed or wills for the charitable trust (see Appendix 1).73
The governing document is a rulebook which sets out a charitable trust in the form of
writing.74 Once the Charity Commissions have accepted the proposed charitable trust
for registration, a registration number will be allocated to the charitable bodies.75 The
number must be recorded for future reference and inquiry for the purpose of tax
concessions.
68
Ibid, s 3(1).
69
Ibid, s 4(1).
70
“Guidance public benefit: Rules for charities” (The Charity Commission, 14 February 2014).
<https://www.gov.uk/guidance/public-benefit-rules-for-charities> accessed on 17 May 2017.
71
The personal benefit is ‘incidental’ where after having regard both to its nature and to its
amount, it is a necessary result or by-product of carrying out the purpose.
72
“Guidance how to set up a charity” (The Charity Commission, 20 May 2014).
<https://www.gov.uk/guidance/how-to-set-up-a-charity-cc21a> accessed on 15 May 2017.
73
Ibid.
74
“Guidance how to write your charity's governing document” (The Charity Commission, 2
June 2014). <https://www.gov.uk/guidance/how-to-write-your-charitys-governing-
document> accessed on 15 May 2017.
75
Ibid.
76
Note 22 at 13.
19
3.1.2 Tax Concession for charitable trust in England and Wales
The Office of Her Majesty’s Revenue and Customs is one of the stakeholders in the
registration of charitable trust in relation of the tax concessions.77 After submitting the
application of registering a charitable trust, the Charity Commissions will need to
consult the Financial Intermediaries and Claims Office under the Office of Her
Majesty’s Revenue and Customs in the matters relating to granting of the tax
concessions. The charitable trust that registered with the Charity Commissions can
enjoy tax concessions.78 The needs for consultation with the Financial Intermediaries
and Claims Office when granting the tax concessions indicate the limitation power of
the Charity Commissions. 79
77
Ibid.
78
Ibid at 29.
79
Ibid at 13.
80
Lord Hodgson, “Trusted and Independent: Giving charity back to charities”, (20012) Review
of Charities Act 2006. p 45.
81
Note, s 13(4).
82
Ibid, s15(1).
20
Charity Commissions are not permitted to interfere with the administration of the
charitable trust by the trustee.
One of the limitation of the Charity Commissions is the decisions made by the
Charity Commissions is not conclusive and can be appealed by the beneficiaries. The
review of the Charity Commissions’ decision can be initiate by the disputant with the
consent from Attorney General, acting as parens patriae.84 The appeal can be made to
Charity Tribunal and the decision of the tribunal can be referred to the court.
83
Ibid, s 76.
84
Lindsay Driscoll, “England and Wales: Pemsel plus” in McGregor Lowndes, Myles, &
O'Halloran, Kerry, eds, Modernising Charity Law: Recent Developments, Future Directions
(Cheltenham: Edward Elgar Publishing, 2010) at 54; Parens patriae means the principle
where the authority acting as the legal protector of the public that unable to protect
themselves.
21
information in any type of publicity in compliance with the confidentiality right under
data protection law. The charitable bodies are allowed under the Charities Act 1992 to
obtain the court order preventing unauthorized individual to fundraising on its behalf.
In accepting or refusing donation, the trustees must act in their best interest of the
charitable trust. When offering any benefit, rewards, or incentive to the donor, the
fundraising organisation must ensure that the benefits are appropriate and
proportionate to the size of the gift. Next, the returning policy for the donation is that
the fundraiser must not refund the donation unless the Charity Commissions said
otherwise.
3.2 AUSTRALIA
85
Among the rule is the fundraising organisation carrying out collection must comply with the
relevant licensing/permission procedures as stipulated under section 1(1) of the House to
House Collections Act 1939.
86
Code for Fundraising Practice.
87
Ian Ramsay, & Miranda Webster, Registered Charities and Governance Standard 5 : An
Evaluation (Australian Business Law Review, 2017).
22
prerequisite for the said entity to access certain Commonwealth tax concessions88 and
also is a prerequisite for other exemptions, benefits and concessions provided under
Australian laws.89 The charitable trust must be registered with the Australian Charities
and Not-for-profits Commission before they can be endorsed by the Australian
90
Taxation Office (ATO) to receive charity tax concessions. Hence, charity
registration is important in order to ensure that only the worthy charity organizations
will receive particular concessions.91
Once registered, the charitable bodies can apply for charity tax concessions such as
income tax exemption or goods and services tax concessions as a charity from the
Australian Taxation Office (ATO).97 Furthermore, they can also apply for additional
tax benefits as a public benevolent institution (PBI), health promotion charity (HPC)
or charity for the advancement of religion.98 Moreover, charitable companies limited
by guarantee registered under Corporation Act 2001 and also registered with the
Australian Charities and Not-for-profit Commission, are not required to prepare a
88
Australian Charities and Not-for-profits Commission Act 2012 (Cth), ss 15-5(3), 20-5(2).
89
Ibid, ss 15-5(4), 20-5(3).
90
“Australian Charities and Not-for-profit Commission”, Australian Government
<http://www.acnc.gov.au/> accessed on 7 May 2017.
91
Note 21.
92
Note 90.
93
Note 88, ss 25-5(3)(a).
94
Charities Act 2013, ss 6(1)(a), 12(1).
95
Note 88, ss 6(3)(d).
96
Note 94, ss 5(d).
97
Note 90.
98
Ibid.
23
directors’ report.99 This may reduce the cost of an audit of a charity because the auditor
is not needed to review the directors’ report to check for inconsistencies with the
audited financial report.100
The powers of Australian Charities and Not-for-profit Commission are derived from
the Australian Charities and Not-for-profits Commission Act 2012 and Charities Act
2013.101 The functions of Australian Charities and Not-for-profit Commission are as
followed. Firstly, to determine the status of charity and to register qualified entities.102
Secondly, to give guidance and education to the registered charities in complying and
comprehending the Australian Charities and Not-for-profit Commission Act 2012.103
Thirdly, to monitoring and enforcing function in order to ensure the registered charities
will comply in situation where education is insufficient.104 Fourthly, to maintain public
register that contains information on registered charities.105 Lastly, it has obligation to
cooperate with other regulators and government agencies in order to minimize
regulatory duplication.106
99
Note 87.
100
Note 90.
101
Ibid.
102
Note 88, s 15-5(2).
103
Ibid, ss 15-5(2)(b), 110-10(1).
104
Ibid, ss 15-5(2)(b)(ii).
105
Ibid, pt 2-2.
106
Ibid, s 15-10(f).
107
Note 90.
24
they relate to a charity's compliance with requirements of the Australian Charities and
Not-for-profit Commission Act 2012.108
The Australian Charities and Not-for-profit Commission does not have the power to
inquiry or investigate where the concern is not in its area of regulatory responsibility.
For instance, fundraising activities are not under the Australian Charities and Not-for-
profit Commission responsibility because these activities are regulated by the state and
territory law and Australian Charities and Not-for-profit Commission’s ambit would
not include fundraising as specifically stated by the previous government.109
The state fundraising statutes still define “charity” differently despite the
introduction of the Charities Act 2013, which has given a more uniform definition of
113
charitable purposes across Commonwealth legislation. For instance, South
Australian legislation provides specific requirements to constitute a charity whereas
the Australian Capital Territory legislation only defines it as including “any
benevolent, philanthropic or patriotic purpose.”114 Therefore, there is no uniformity
when it comes to the area of regulation for charities across the state jurisdiction.115
Moreover, the federal Charities Act 2013 is used by the Australian Charities and
Not-for-profit Commission to make its determinations in registering charities but the
108
Ibid.
109
Note 21 at 235.
110
Ibid at 232.
111
Ibid.
112
Ibid.
113
Ibid at 233.
114
Ibid.
115
Ibid.
25
state requirements are different.116 For instance, an organization would not be found
as a charity by the Australian Charities and Not-for-profit Commission but still be
subject to the state charitable fundraising legislation.117 In addition, it would also be
unnecessarily to apply for state fundraising licence when the organization has been
given charitable status by the Australian Charities and Not-for-profit Commission.118
This problem will force the charities organizations to perform exhaustive research as
to their obligations and eventually will stretch their resources. 119 Furthermore,
charities organization with multiple state branches will face problems due to
inconsistent state legislative requirements and regulatory inconsistency.120
Charitable entities are the organisations that perform charitable activities or exist
entirely for charitable purposes. At present in New Zealand, there are a number of
different legally recognised forms of charitable entities which their establishments
were for charitable purpose, namely an incorporated society, a trust, a charitable trust
board, or a company. 121 As an entity which provides a benefit to the public, the
legislation requires such entity to register with the Charities Services. Charities
Services is a regulatory body formed under the Department of Internal Affairs to
oversee and regulate the registration of charitable trust in New Zealand.122 Meanwhile,
in respect of incorporated charitable trusts, the registration is the process that
establishes such a trust as a corporate body.123 A charitable entity can be incorporated
116
Ibid.
117
Ibid.
118
Ibid.
119
Ibid.
120
Ibid.
121
Charities Act 2005, s 4.
122
“Court jurisdiction, trading trusts and other issues : Review of the law of trusts fifth issues
paper”, (NZLC IP28, 2011)
<http://www.lawcom.govt.nz/sites/default/files/projectAvailableFormats/NZLC%20IP28.pdf
> accessed on 20 May 2017.
123
Ibid, chapter 9.
26
under the Charitable Trusts Act 1957, Companies Act 1993 and the Incorporated
Societies Act 1908.124
124
Fortune Manning, “Establishing a Charitable Entity” (2017)
<http://www.findlaw.co.nz/articles/4355/establishing-a-charitable-entity.aspx> accessed on
20 May 2017.
125
“Apply for registration”, Charities Services, New Zealand Government
<https://www.charities.govt.nz/apply-for-registration/how-to-apply/> accessed on 10 May
2017.
126
Note 1.
127
“Charities and charitable status” (2017), Community Law
<http://communitylaw.org.nz/community-law-manual/chapter-3-community-organisations-
and-the-law/charities-and-charitable-status-chapter-3/> accessed on 20 May 2017.
128
Note 121, s 24.
129
Ibid. s 13.
27
all of its ‘officers’ must be qualified under the Act. An officer is disqualified in the
event if the officer is an undischarged bankrupt, or convicted of a dishonesty offence
within the last seven years.130 Next, the second criteria is the entity must have
a charitable purpose. Charitable purpose has been defined under Section 5 of the
Charities Act 2005 which includes for the relief of poverty, the advancement of
education or religion, and any other matters beneficial to the community. In some
cases, a specific Act of Parliament will state that the purposes of a particular entity are
charitable. Section 61A of the Charitable Trust Act 1957 maintains that it is charitable
to provide facilities for recreation or other leisure time occupations which is beneficial
to the public and for the interest of social welfare.
There are several advantages that a charitable entity will attain by the said registration.
Firstly, the main consequence of the registration will be that a charitable entity would
be exempted on its income and it is easier for the entity to apply and receive public
funding. A charitable entity needs to be registered under the Charities Services in order
130
Ibid. s 16.
131
Greenpeace of New Zealand Inc (SC 97/2012) [2014] NZSC 105; Dowse, E. Political
Puposes and Charity Law in New Zealand (2015). p 4.
132
“Re Greenpeace of New Zealand Incorporate”, Charities Services, New Zealand Government
<https://www.charities.govt.nz/news-and-events/media-releases/greenpeace-of-new-zealand-
incorporated-media-release-supreme-court/> accessed on 10 June 2017.
133
Ibid.
134
Ibid.
28
to receive the ‘charitable status’ which is requisite for tax exempt purposes. 135
Charitable entities which operate without a constitution or trust deed would be liable
for taxes as a result of the non-compliance of the requirement to be a registered
charitable entity as provided above.136
Secondly, the registration also acts as the evidence of its charitable status. A
registered charitable entity will entitle for the registration number in which can be
displayed on promotional and identification material to the potential donors or funders.
Thirdly, the registration also enables the supporters and funders to find detailed
information about the charitable entity on the Charities Register. Fourthly, the
registration is also important to ensure a greater public confidence toward the
registered charitable entity. A registered charitable entity would probably enjoy the
greater public trust and confidence due to the fact that the information about its
activities and the utilization of resources are made available to the public via the
Charities Register. And lastly, the registration is also essential to encourage and
promote the effective use of charitable resources. Through the registration, all the
registered charitable entities are subject to certain guidelines and requirements in their
dealing with charitable trusts.
The administration of charitable trust, the Charities Services comes into picture as the
regulatory body that administers and monitors the conduct of the registered charitable
entities. The Charities Services which has been instituted under the Department of
135
“Charitable Organisations” (2014), Inland Revenue, <http://www.ird.govt.nz/charitable-
organisations/chart-orgs-index.html> accessed 1 May 2017.
136
Myles, McGregor-Lowndes, “Introduction” in McGregor-Lowndes, Myles & O’ Halloran,
Kerry, eds, Modernising Charity Law : Recent Developments and Future Directions
(Cheltenham: Edward Elgar Publishing, 2010). p 33.
137
Note, ss37, 38.
138
Ibid.
29
Internal Affairs, is the main regulatory body that is established under Charities Act
2005 in order to promote public trust and confidence in the charitable sector and to
encourage the effective use of charitable resources.
The Charities Services has a duty in maintaining the Charities Register which
currently contains information about 27,000 registered charitable trusts in New
Zealand. 139 The Charities Register also works as the database or public record of
registered charitable trusts as provided under Charities Act 2005.140 In the event when
there is any change to the charitable trust such as contact details of the officers,
appointment or retirement officers, or any changes to the constitution, those changes
must be updated with the Charities Services in order to provide an up-to-date
information to the public.
Moreover, the Charities Services also responsible to review the annual return and
financial statement of all the registered charitable entities.141 According to the new
accounting standards set up by the External Reporting Board (XRB), all registered
entities have to present their annual financial statements to the Charities Services as
the effect of the registration.142
139
Note 33 at 75.
140
It summarises each charity’s purposes, activities, sector and includes their annual return.
Annual return in this context is a yearly report which details on a charitable entity’s income,
expenditure and activities
141
Note, ss 42(2)(b), 42A and 42B.
142
“Standard for Not-for-profit Entities After 1 April 2005”, External Reporting Board,
<https://www.xrb.govt.nz/dmsdocument/425> accessed on 24 May 2017.
143
“Charities Services”, New Zealand Government <https://www.charities.govt.nz/about-
charities-services/the-role-of-charities-services-/> accessed on 27 May 2017.
144
Ibid.
145
Ibid.
30
3.3.5 Limitations to the power conferred on Charities Services
There are, however, some limitations in the power of the Charities Services as the main
regulator and administrator of charitable trust. Firstly, in the event where the officer of
charitable entities is disqualified by one of the factors set out in the Section 13 of the
Charities Act 2005, the Charities Registration Board has the power to overrule the
conditions provided under the provision.146 In other words, this may raise an issue of
accountability to be a trustee of a charitable trust.
146
Note 121, s 14.
147
Ibid.
148
Ibid.
149
“Donating”, Charities Services, New Zealand Government
<https://www.charities.govt.nz/charities-in-new-zealand/donating/> acccessed on 12 May
2017.
150
Ibid.
31
In New Zealand, the most common methods of raising funds can be seen in the
form of the use of third-party fundraisers as well as the professional fundraisers.151
The charitable entities may choose to undertake fundraising activities by recruiting
employees or volunteers to raise funds.152 Furthermore, the fundraising activities in
New Zealand may also be implemented through the face-to face fundraising, street
appeal fundraising, advertisements and electronic fundraising.153
Generally, there are two private bodies which provide a regulatory framework for
the fundraising activities in New Zealand, namely the Public Fundraising Regulatory
Association (PFRA) and Fundraising Institute of New Zealand (FINZ). Those private
bodies play an important role in setting up a professional and ethical standards for
fundraising activities as well as encouraging the development of philanthropy and also
to provide an advocacy voice for the charitable sector in New Zealand.
3.4 SINGAPORE
The regulation for administration of the charitable trust in Singapore is governed under
the Charities Act 1994 (Revised Edition 2007).154
151
“Information Disclosure Regulations for Third-party Fundraisers Making Requests for
Charitable Purposes in New Zealand” (Ministry of Business, Innovation and Employment,
2015). p 10-16.
152
Ibid.
153
Ibid.
154
Chapter 37.
155
Charities (Registration of Charities) Regulations, SL178/2007. Regulation 2.
156
Ibid. regulation 4
32
other documents or other information as the Commissioner may require.157 Where a
registered charity ceases to exist or if there is any change in its trusts or in its particulars
entered in the register, it is the duty of charity trustee to notify the Commissioner of
any such change and to furnish him with copies of new or altered trusts.158
157
Charities Act 1994.
158
Ibid, s 5(3).
159
Racheal P., & S. Leow, Four Misconceptions About Charity in Singapore (Singapore Journal
of Legal Studies, 2012) 38. p 37-54.
160
Cap. 311, 1985 Rev. Ed. Sing.
161
‘Exempt charity’ is the following institutions, (a) any university or educational institution,
hospital or religious body established by an Act of Parliament; and (b) any other institution
which the Minister by order declares to be an exempt charity for the purposes of this Act.
162
Note 166, s. (5)(6).
163
Note 164, regulation 4.
164
Guidance on Regulation of Qualifying Grantmakers, Commissioner of Charities’ Office.
165
Ibid, regulation 3.
166
Note 24 at 192.
167
Ibid.
33
validated by section 67, it is not exclusively charitable and they cannot be registered.168
Otherwise registration is conclusively presumed that the trust is charitable at the time
it is on the register.169
The Commissioner of Charities is appointed under the Charities Act 1994 (Revised
Edition 2007) to promote the effective use of the charity resources by encouraging
better methods of administration, by giving charities trustee information and by
investigating and checking abuses.175 The general object is to promote the work of any
charity in accordance with its objects but the Commissioner of Charities must not take
168
Ibid at 193.
169
Ibid.
170
“Setting Up a Non-Profit Entity in Singapore – Part 1”,
<https://www.guidemesingapore.com/incorporation/other/non-profit-entity-part1> accessed
on 13 May 2017
171
Ibid.
172
Ibid.
173
Ibid.
174
Ibid.
175
Note 24 at 192.
34
part in the administration of any charity.176 The Commissioner of Charities must make
a yearly report to Minister and is ultimately answerable to Parliament. 177 The
objectives of the Commissioner of Charities are, firstly, to maintain public trust and
confidence over the charity. Secondly, to promote compliance by governing board
members and key officers with their legal obligations in exercising control and
management of the administration of their charities. Thirdly, to promote the effective
use of charitable resources and to enhance the accountability of charities to donors,
beneficiaries and public.178
176
Ibid.
177
Note 166, s 4(3).
178
Ibid, s 4(1).
179
Ibid, s 4(2).
180
Ibid, s 4B(1).
35
The main functions of the Commissioner of Charities are to maintain the
register of the charity. 181 The Commissioner of Charities also confer the power to
institute inquiry to charitable bodies as stated under section 8(1) of Charities Act 1994
(Revised Edition 2007). Besides, the Commissioner of Charities also has concurrent
jurisdiction to the Hight Court is certain aspect as provided under section 24(1) of
Charities Act 1994 (Revised Edition 2007). The Commissioner of Charities also has
power to act in protection of the charities.182 Nevertheless, it must be with the consent
from Attorney-General before any action can be taken by the Commissioner of
Charities. 183
181
Ibid, s 5(1).
182
Ibid, s 25(1).
183
Ibid.
184
Chapter 134.
185
Income Tax 1947, s 13U(2).
186
“Charity Portal”, <https://www.charities.gov.sg/Fund-Raising/Pages/Types%20of%20Fund-
Raising%20Permits-Licences.aspx> accessed on 14 Jun 2017
187
Ibid.
36
of Social Service or the Community Chest.188 This permit can be applied through the
websites of Singapore Police Force and National Council of Social Service.189
There are some regulations that must be complied with by the charitable
organizations in certain situations in order to conduct charitable fundraising.190 Firstly,
anyone who wishes to conduct fundraising activities with charitable organizations
must have written agreement with the latter.191 Secondly, when a commercial fund-
raiser is promoting a fundraising appeal for a charitable organization, the donations
received must be given to the latter directly and any reimbursement or payment to the
former must be made separately by the latter.192 Thirdly, the charitable organizations
have the duty to provide accurate information of such activities which is not
misleading to the donors or to the general public.193 Fourthly, the donations received
by the said organizations must be used in accordance to the intention of the donors and
if such intention is not specified, proper communication regarding the purpose of
donation must be made to the donors during solicitation. 194 Furthermore, if the
donation cannot be utilized, the donation received must be refund or can be used for
other purposes as approved by the Commissioner of Charities.195 Fifthly, the charitable
organizations have the duty to maintain a proper accounting record of fundraising
activities for a minimum period of 5 years and the duty to disclose the donations
received in their financial statements.
As a result from the findings above, several conclusions can be drawn on which
countries administration of charitable trusts is the most preferred. In the area of
registration of charitable trust, establishment of regulatory bodies for administration
of the charitable trust and tax concessions as well as charitable fundraisings, none of
188
Ibid.
189
Ibid.
190
Note 195.
191
Ibid.
192
Ibid.
193
Ibid.
194
Ibid.
195
Ibid.
37
these are regulated in Malaysia. Our purpose is to highlight after making comparison
on the most effective mode of administration of charitable trust in Malaysia.
In respect to the duty to register the charitable trust, we can see that there is leniency
in the New Zealand approach that requires the settlor, trustee and other representatives
from the charitable bodies to register the trust. However, in Singapore and United
Kingdom, only the trustee can register the charitable trust. In United Kingdom,
charitable trust which is below £5000 is not required to register. This may narrow
down the scope of registration via the implementation of income limitation in regard
to the amount of donations received. The approaches taken by New Zealand and
United Kingdom are arguably the preferred choice because it may reduce the rigidity
and to promote simple registration.
All the countries in the research have established their own regulatory body in
supervising and monitoring the administration of charitable trust. In United Kingdom
and Australia, the regulatory body is Commissions of Charities and Australian
Charities and Not-for-profit Commission respectively. These regulatory bodies are
statutory independent bodies created under Charities Act 2011 and Australian
Charities and Not-for-profit Commission Act 2012 correspondingly. Meanwhile, in
New Zealand and Singapore, the regulatory body is Charities Services and
Commission of Charities respectively. However, unlike United Kingdom and
Australia, their regulatory body is under the government department. Therefore, we
are on the opinion that the best model of regulatory bodies would be that of United
Kingdom and Australia. This is necessarily to ensure the regulatory body is free from
any influence of the government and politics.
Most of the regulatory bodies have the power to investigate and to institute
inquiry to the charitable trust in certain areas of concern as well as administrative
power. However, we are on the opinion that quasi-judicial power of the United
Kingdom and Singapore’s regulatory bodies such as determining the doctrine of cy-
38
pres is not needed in order to preserve the inherent power of the judiciary in Malaysia.
Therefore, in our opinion, the approach taken by the New Zealand and Australia is
arguably the best.
In respect of the limitation of the regulatory bodies, we are on the opinion that
the decision made by the regulatory bodies should not be conclusive and can be
appealed to the court in order to prevent arbitrariness. This approach is taken by all the
respective regulatory bodies in the United Kingdom, New Zealand, Australia and
Singapore.
We are on the opinion that in order for a charitable trust to enjoy tax
concessions, registration of a charitable trust with a regulatory body is a must. Hence,
by registering with the regulatory body, the relevant taxation office will only then
endorse the application of the charitable trust to access such benefits. This method will
prevent some institutions to set up a sham charitable body in order to evade tax. This
approach of granting tax concession through registration is adopted by New Zealand
and Australia.
39
Zealand is arguably should be followed to simplify the procedure in applying the
license. Although leniency is significantly needed, monitoring by the regulatory body
is arguably needed to ensure the effective use of charitable trust funds.
40
CHAPTER FOUR: RECOMMENDATIONS
41
4.0 INTRODUCTION
The scope of this chapter which cover four aspects of the findings in Chapter 3 namely
registration of the charitable trusts, a regulatory body to administer the charitable trust,
tax concessions and fundraising activities by the charitable trusts. the
recommendations below are for the purpose of regulating of the administration of
charitable trust in Malaysia.
The findings of the objectives of the research suggest that Malaysian law as embodied
in the Trustee Act 1949 has to be amended in the aspect of registration of the charitable
trust. The setting up a regulatory body to administer the said trust is needed to cater
for the fundraising activities of the charitable trust.
42
trust to the settlor or any representatives from the charitable body. This leniency is
needed to ensure that any rigidity in registration can be reduced to encourage
registration through simple process of registration.
196
Sabah Foundation Enactment 1966 and Sarawak Charitable Trusts Ordinance 1994.
43
The eligibility and procedure of registering the charitable trust may also be
incorporated under the Trustee Act 1949. In term of tax concessions by the charitable
trust, we are in the opinion that the amendment may have to be made under Part X of
the Income Tax Act 1967 to include such recommendation whereby only registered
charitable trust may enjoy tax exemptions.
As for setting of a regulatory body we are of the opinion that the regulatory body for
charitable trust in Malaysia should arguably follow the structure of Charity
Commissions in United Kingdom which is a corporate body. The regulatory body will
have Commission’s members appointed by the Minister and having their own
Executive Management. The said body shall be answerable only to the government.
The suitable model available in term of administrative structure is the Suruhanjaya
Syarikat Malaysia (SSM) on the reason that the body carries the same function as the
Registrar of the Companies which is supervising the regulation of the companies law
in Malaysia via Companies Act 2016. Thus, we are in the opinion that these similar
functions carried out by the Suruhanjaya Syarikat Malaysia may be followed when
establishing a regulatory body governing the charitable trust in Malaysia. We suggest
that the said body is called ‘Lembaga Amanah Kebajikan Malaysia’. The used of the
name ‘Lembaga’ connotes a corporate body, ‘Amanah Kebajikan’ means the
charitable trust and, ‘Malaysia’ implying the application of the regulatory body in a
Federal level.
The functions are adopted from United Kingdom and Singapore Charity
Commissions which arguably should be followed by Lembaga Amanah Kebajikan
Malaysia. Amongst the functions of Lembaga Amanah Kebajikan Malaysia are as
followed. Firstly, Lembaga Amanah Kebajikan Malaysia should have function to
determine the status of charitable trust when application to register is submitted to
them. Lembaga Amanah Kebajikan Malaysia must determine the status of charitable
trust based on the law of Malaysia and under the eligibility requirement as stated
before. Secondly, Lembaga Amanah Kebajikan Malaysia should encourage and
facilitate the better administration of charitable trust. As the only regulatory body
44
supervised the charitable trust, Lembaga Amanah Kebajikan Malaysia should
encourage the trustee and assist them in order to ensure the better administration of the
trust funds. Thirdly, Lembaga Amanah Kebajikan Malaysia should identify and
investigate apparent misconduct or mismanagement in the administration of charitable
trust. Lembaga Amanah Kebajikan Malaysia should investigate if there is
mismanagement of the trust funds to protect the beneficiaries. Fourthly, Lembaga
Amanah Kebajikan Malaysia should obtain, evaluate and disseminate information
pertaining to the performance of any Commission’s functions to the government and
the public. Lembaga Amanah Kebajikan Malaysia is answerable to the government,
hence they need to submit a report relating to their performance in monitoring the
charitable trust in Malaysia.
45
Amanah Kebajikan Malaysia may have an administrative power such as to advice the
trustee of charitable trust. The regulatory body should advice the trustees in the matters
relating to administration of trust funds if requested to do so in order to facilitate the
better administration of the charitable trust. Fourthly, Lembaga Amanah Kebajikan
Malaysia should have power to act for the protection of the charitable trust by
investigating any misconduct of charitable funds in which the regulatory body may
have a power to remove any trustee that liable if it is expedient to do so. Lembaga
Amanah Kebajikan Malaysia may act on behalf of the beneficiaries to bring the case
to the court in the case if the mismanagement of the fund is occurred with the
intervention of the Attorney-General.
Despite above all the power conferred to the regulatory body, certain limitation
must be imposed to. Firstly, we recommend that the decision of Lembaga Amanah
Kebajikan Malaysia relating to the approval or rejection of the application of the
charitable trust in the national register must be made not conclusive. The trustee may
bring the case to the court to challenged such decision.
The charitable trust that registered will enjoy exemption of tax. The granting of such
relief must be consulted to the Department of Inland Revenue (LHDN). This is to
ensure the reliability of the information such as financial standings of the trustee and
the account of such trust funds, in which the consultation with the Department of
Inland Revenue is necessary.
46
4.4 Fundraising activities by charitable trusts
The law regulating the fundraising in Malaysia is the House to House and Street
Collections Act 1947. Under section 4(1) of the House to House and Street Collections
Act 1947, the licensee officer is given a power to grant license to any person who
desire to promote collections. The licensee officer here is the Chief Police Officer in
charge of the police within the area and he have a full discretion in granting or rejecting
of the license. Moreover, in term of regulations, the Minister has power to impose such
law regarding the street collections as specified under section 5(1) of the House to
House and Street Collections Act 1947. In our opinion, the current law is sufficient but
lacking in respect of enforcement. Further, the regulations prescribe under section 5(1)
of the House to House and Street Collections Act 1947 is only cover the law in respect
of procedure in acquiring of license but not in term of guidelines to fundraising. Hence,
the proper guidelines to fundraising is needed to ensure the effective use of trust fund.
In our opinion, the House to House and Street Collections Act 1947 in Malaysia
need to be amended to include the proper guidelines for charitable trust to fundraising
by incorporate the suggested guidelines as referred under the Code for Fundraising
Practice of the United Kingdom. We recommend for the Minister as the power
conferred under section 5(1) of the House to House and Street Collections Act 1947
may include such proper guidelines to regulate fundraising practice by charitable
bodies to be included under the same provision by following the Singapore House to
House and Street Collections Act 1947. In our opinion, the Lembaga Amanah
47
Kebajikan Malaysia may be vested the power to monitor the guidelines under the
House to House and Street Collections Act 1947 in order to ensure that all the
registered charitable trust is following the guidelines accordingly. This may invite
public confidence over the administration of the charitable trust in respect of
fundraising.
48
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